If at a Given Volume Total Costs and Fixed Costs

question 6

Multiple Choice

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

• A) (Total costs - Fixed costs)/Unit volume
• B) (Total costs/Unit volume) - Fixed costs
• C) (Total costs × Unit volume) - (Fixed costs/Unit volume)
• D) Total costs - (Fixed costs/Unit volume)

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Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust to market changes fully.

Marginal Cost

The expense associated with manufacturing an extra single unit of a product or service.

Profit Maximizing

The process of adjusting production and sale strategies to achieve the highest possible profits.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; represents the extra amount over the payment needed to keep a resource in its current use.